Indiana’s Innovative System Clings to Life

Published November 27, 2011

As governor of Indiana, Mitch Daniels has achieved remarkable success in a policy area that challenges every governor across the country: the desperate need for Medicaid reform.

Unfortunately, President Barack Obama’s administration is signaling Daniels’ successful reforms may be a casualty of the White House’s nationalization of the health-care system. The Healthy Indiana Plan, which currently covers more than 45,000 Hoosiers and has an incredible 98 percent public approval rating, is based on a federal Medicaid waiver that was approved in 2007 and is up for renewal next year. There’s a waiting list of more than 50,000 people who want to be on the program but can’t because of budgetary constraints.

Daniels’ plan is based on an assumption that’s controversial but principled: Empowering low-income Americans to make decisions for themselves in the health-care marketplace results in better outcomes, and less costly ones, than letting bureaucrats decide things for them.

Yet instead of endorsing this major step toward leveraging individual empowerment to achieve cost savings, the Obama administration has denied Indiana’s application for an extension of the program, forcing the state to reapply through a more difficult process with new requirements. According to Seema Verma, founder of SVC Inc. and a designer of the Healthy Indiana Plan, the U.S. Department of Health and Human Services is requiring Indiana to go through a state plan amendment process, meaning the state must modify its system to meet new regulatory demands and renew the plan every three to five years.

Indiana is running out of time to gain approval for a reworked proposal. If the Obama administration denies it again, the Healthy Indiana Plan will expire and the tens of thousands of Hoosiers who are so pleased with this innovative system will lose their coverage. This looks suspiciously like partisan politics or a stubborn resistance to innovation, not a desire for good outcomes.

By creating a system where low-income Americans have an incentive to make cost-conscious decisions, the Healthy Indiana Plan creates a consumer-based approach to health care. This is particularly important for Medicaid, which is the largest and fastest-growing budget item for many states, a fact that likely will be cemented when Obama’s health-care overhaul pushes 25 million more Americans onto the already overburdened program.

Instead of building on the success of Gov. Daniels and his team in demonstrating there is no class divide in consumer-powered health care — that yes, the poor can make decisions for themselves without need of a big bureaucracy — the White House doesn’t just refuse to expand the program, it declines even to allow such an approach to continue.

If government is truly about what’s best for the nation, it’s time Obama and his allies set aside their ideological allegiance to top-down, one-size-fits-all health care and recognize the power of the states to design programs that improve the lives of their citizens.

Domenech is a research fellow at The Heartland Institute and managing editor of Health Care News. Contact him at [email protected].